The Economic Impacts of the US–China Trade War

Abstract

In 2018, the United States launched a trade war with China, marking an abrupt departure from its historical leadership in integrating global markets. By late 2019, the United States had imposed tariffs on roughly $350 billion of Chinese imports, and China had retaliated on $100 billion of US exports. Economists have used a diversity of data and methods to assess the impacts of the trade war on the United States, China, and other countries. This article reviews what we have learned to date from this work.

On the Distributional Effects of International Tariffs

“…Recent papers have estimated the effect of tariffs on domestic prices and map those changes into welfare. For example, Fajgelbaum et al (2020) and Amiti et al (2019) document a complete pass-through of tariffs into duty-inclusive import prices, a feature consistent with our model assumptions. Furthermore, Fajgelbaum et al (2020) estimate an aggregate income loss of 0.08% of GDP and Amiti et al (2019) estimate an annual deadweight loss of 0.16% of GDP (after adjusting both estimates to be consistent with the tariff rate used in our baseline model).…”

Trade Policy and Jobs in Vietnam: The Unintended Consequences of Trump’s Trade War

“…First, it extends a nascent but growing literature on the impacts of the US-China trade war. In contrast to the existing studies that focus on the implications of the trade war on Chinese and US consumers and firms (see Fajgelbaum and Khandelwal (2022) for a review of the literature), our paper provides novel evidence on the unintended consequences of the trade war on workers, and in a third country, Vietnam. While Fajgelbaum et al (2021) and Mao and Görg (2020) investigate empirically third-country trade effects of the US-China trade war across countries, we focus on one country, which allows us to understand further how the trade responses translate into labor market effects.…”

Agricultural policy uncertainty and its impact on commodity markets

“…The largest impact on agriculture has been the battle with China, which led to a series of retaliatory tariffs that greatly reduced US agricultural exports to China. The APU index fluctuated during this period and its changes coincided with the progress of the trade war as described in Fajgebaum and Khandelwal (2022) and Bown (2021). For example, following the United States implementing the first round of trade war tariffs in July 2018, the APU index began to rise in August 2018.…”